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ITAT Ruled: Commission to agents of foreign artistes non-taxable
December, 06th 2010

The commission paid to foreign agents of international artistes performing in India is not taxable, ruled the Income Tax Appellate Tribunal (ITAT). The tribunal also ruled that reimbursement of expenses to international artistes performing here is also not taxable. This recent ruling by an ITAT bench has provided relief to many event management companies who hire foreign agents to procure international entertainers to perform in India.

The order, a copy of which is with Hindustan Times, was passed on November 19, in an appeal filed by the Income Tax (I-T) department against Wizcraft International Entertainment Private Limited.

The department filed an appeal after the commissioner of income tax (Appeals) ruled in favour of the company (Wizcraft) saying that payment to an agent and reimbursement of expenses to the performing artistes are not taxable.

As per the case, Wizcraft entered into an agreement with UK-based Colin Davie who provides artiste management services around the world.

The company hired Davie to get singers Diana King and Shaggy, both from the United States of America for various performances in India in 1999 and 2000.

While Wizcraft deducted the tax at source (TDS) while paying the artistes, and deposited the same with the I-T department, the company did not deduct tax while reimbursing their travel and other expenses and while paying commission to Davie.

The assessing officer of the

I-T department was of the view that the payment to Davie was part of the payment to the entertainers.

The officer also held that the nature of services agreed to be rendered by Davie was such that he had to be present in India to perform them.

Wizcraft said the commission paid to Davie is not taxable in India because he had rendered services outside the country only to coordinate the engagements of the international artistes.

For reimbursement of expenses to artistes, the company said there is no element of income and therefore there is no obligation to deduct TDS from the payment.

In the order, NV Vasudevan, judicial member and Pramod Kumar, accountant member of ITAT held that scheduling performances of such reputed artistes in India is not easy.

The ITAT further held that these artistes are known for their unpredictable behaviour. Here comes the role of agent who has the acumen and skills to negotiate with such artistes, the order said.

It added that for rendering such services, depending upon the nature of the deals and time and effort involved, such agents claim commission from organisers.

There is no material on record to substantiate the conclusion of the assessing officer that the entire consideration including fees paid to Davie is in fact fees payable to the artistes to perform in India, the order said adding that this conclusion of the assessing officer is purely on surmises.

On reimbursements, the tribunal observed, The law is well settled that any payment towards reimbursement of expenses is not chargeable to tax.

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